90 Second Lesson: What is a “UCC Article 9” Sale?

QUESTION:

Jack B. emailed, asking, “Please explain what an Article 9 sale is. My lawyer said that if I give a security interest to a lender, it can do an Article 9 sale. What is an Article 9 sale?”

ANSWER:

Well, Jack, Article 9 of the Uniform Commercial Code governs the relationship between a debtor and its secured creditors. Generally, a secured creditor may seek to enforce its rights on its collateral upon a borrower’s default. A secured creditor’s remedies include an Article 9 sale, the right to sell the collateral to a third party in a private or public sale without judicial proceedings.

The secured creditor may pursue the Article 9 sale notwithstanding the borrower’s desire to find some alternative to ceasing operations and liquidating its assets. In other instances, particularly where a borrower wants to avoid liability on a personal guaranty to the secured creditor, the borrower may cooperate in the process in what is sometimes called a “friendly foreclosure.”

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